A fractious feud between two British AI startup co-founders has ended in the High Court, bringing down a £15bn data centre investment plan that once promised to reshape the UK’s artificial intelligence landscape.
Pathfinder AI was formed by serial entrepreneur Martin Bellamy, chairman of Salamanca Group, and waste management tycoon Patrick Hughes, who teamed up in the middle of last year to build a massive data centre campus on a 196-acre site in Ayrshire, Scotland.
The pair formed an Isle of Man-based holding company as the founding shareholder of Pathfinder and secured an option to acquire the Ayrshire site from the local council.
Pathfinder assembled a high-profile board of directors, including former investment minister and Conservative party chairman Lord Dominic Johnson, giving the fledgling startup considerable political credibility.
By November, Pathfinder had completed a seed funding round, raising £100m at a £500m valuation, with the Wykes family, owners of Wykes Engineering, among the biggest investors alongside several board members including Johnson.
But tensions between Hughes and Bellamy had already begun to surface, with the pair holding an “acrimonious” meeting in which they squabbled over how the business was being funded and whether Bellamy had committed to matching a £12.5m loan Hughes had advanced.
Hughes then questioned the legitimacy of the funding round and director appointments, and the board urged the founders to settle their differences in a way that would not “disrupt” the round, counsel that went unheeded.
In December, Hughes fired off an email to billionaire Michael Dell, the world’s seventh-richest person with a net worth of more than $200bn, who had been courted to play a major role in the project, warning that “my trust in Mr Bellamy has been undermined by the way he has operated” and that he could not be certain the information shared was “accurate or complete.”
The board, rattled by the email, concluded the safest course was to return the £100m seed funding to shareholders, placing Pathfinder’s finances on a knife-edge as the company was burning through more than £1m a month with little to show for it.
Four days before Christmas, staff submitted a management buyout proposal and the following day held what was described as a “gun to the head” meeting with the full board, threatening mass resignation if they were not handed the company’s assets.
On Christmas Eve, Hughes tabled a last-minute offer to fund the company for at least three months on the condition that Bellamy was removed, but the offer was rebuffed.
By early January, a deal had been signed by two directors, one of them Lord Johnson, selling the company to management for a £17.7m cash consideration, a transaction Hughes later argued was “a dishonest disposal” contrary to Pathfinder’s interests and in furtherance of those of Bellamy and Johnson.
On Thursday, the High Court rejected Hughes’ bid to unwind the sale, with Mr Justice Trower finding that allegations of dishonesty, conflicts of interest, and a sale at a substantial undervalue rested largely on “unevidenced suspicion.”
Bellamy declined to comment but expressed his satisfaction with the outcome of the court proceedings, while Dell, Hughes, and Lord Johnson were all contacted for comment.
The Ayrshire site remains undeveloped, another speculative data centre proposal that has yet to leave the drawing board amid a broader surge in grid connection applications across the UK.
Grid connection applications have surged from 41 gigawatts to 125 gigawatts in under a year, according to energy watchdog Ofgem, which has now proposed a new “commitment fee” for data centre developers to deter speculative applications clogging the system.
Ofgem director Eleanor Warburton said “consumers should not bear the risks created by speculative projects taking up space in the system,” adding that such projects “can delay other schemes and create uncertainty about future network needs.”